CME Bundle Futures Reference Guide The Power of the Eurodollar Bundle. The Convenience of a Single Contract.

29 MAY 2015 David Reif

Frederick Sturm

Interest Rate Business Line Management

Research & Product Development

312 648 3839

312 930 1282

[email protected]

[email protected]

CME Bundle futures are contracts for delivery of bundles of CME Eurodollar (ED) futures. They are simple and powerful. They permit the user not just to trade but to hold multiple years of ED futures exposure as a single accounting line item. This guide introduces the basics of Bundle futures: what they are, how they work, how they relate to neighboring markets. • • • • • •

Section 1 summarizes contract terms and conditions.   Section 2 details delivery procedures.   Section 3 discusses the 100% margin offsets that apply between Bundle futures contracts and their corresponding ED bundles.   Section 4 addresses hedge effectiveness, notably the close correlation between Bundle futures price dynamics and movements in par rates on plain-vanilla interest rate swaps. Section 5 spells out standards for block trading. Section 6 concludes with a discussion of the applicable exchange fees.  

(1) Bundle Futures Contract Specifications Bundles, introduced by the Exchange in 1994, are intra-market combinations ED futures. Each bundle is a sequence of ED futures with consecutive March Quarterly delivery months. Like any other ED spread or combination, a bundle decomposes instantly after it is traded: A long (short) position of one each of the bundle’s constituent ED contracts is booked immediately to the buyer (seller). By contrast, a Bundle futures contract expires by delivery of its specified ED bundle. Only if the Bundle future goes to delivery at expiration does it disassemble into the ED futures in its 1 contract-grade bundle. Exhibit 1 summarizes Bundle futures contract specifications. (1a) Unit of Trade -- $1 Million Notional of Term Floating Rate Exposure The hallmark of the Bundle futures contract is its underlying unit of trade: • • • • •

a notional 2-year, or 3-year, or 5-year floating-rate Eurodollar interbank time deposit, with principal amount of approximately $1,000,000, for spot (t+2) settlement on the third Wednesday of the Bundle futures delivery month, paying 8, or 12, or 20 consecutive quarterly installments of floating rate interest at the three-month London interbank rate, with floating rate resets occurring on IMM Monday (i.e., the Monday before the third Wednesday) of each March, June, September, and December.

Through the contract’s delivery process, this notional unit of trade manifests as a bundle of ED futures expiring in each of the nearest 8, or 12, or 20 consecutive March Quarterly months. Example: Contract grade for a Two-Year Bundle futures contract for June 2017 delivery is the 2-year bundle comprising one each of the 8 ED contracts expiring in June 2017 through March 2019. In effect, the contract-grade bundle is a synthetic proxy for a 2-year London interbank placement with $1 million principal that pays quarterly floating rate interest.

1

2

All times of day given in Exhibit 1 and elsewhere in this publication are Chicago time, unless otherwise noted.

| CME Bundle Futures | 29 MAY 2015

| © CME GROUP

Exhibit 1 -- CME Bundle Futures Contract Specifications Trading Unit

One bundle of CME Three-Month Eurodollar (ED) futures, with Bundle Tenor that meets the Delivery Standard. Bundle: One each of a sequence of four (4) or more ED futures with consecutive Delivery Months in the March Quarterly delivery cycle, spanning a given Bundle Tenor, for a given Bundle Month. Bundle Month: For a given Bundle, the Delivery Month of the constituent ED contract nearest to delivery. Bundle Tenor 2-Year 3-Year 5-Year

Number of constituent ED contracts with consecutive March Quarterly delivery months 8 12 20

Delivery Months

March, June, September, December

Price Basis and Contract Size

Price is quoted in IMM Index points, as the arithmetic average of prices of ED futures comprised in the Delivery Standard bundle. Example: A Bundle futures price of 93.6700 points signifies an average ED contract interest rate of 6.33 percent per annum. Bundle Futures Two-Year Three-Year Five-Year

0.01 IMM Index Points ($ per contract) 200 300 500

Bundle Futures Two-Year Three-Year Five-Year

Outrights: 0.0025 IMM Index Points ($ per contract) 50 75 125

Minimum Price Increment

Calendar Spreads: 0.000625 IMM Index Points ($ per calendar spread) 12.50 18.75 31.25

Daily Settlement Prices

Average of daily settlement prices of ED contracts in Delivery Standard bundle, rounded to fourth decimal place (0.0001), with tie values (unrounded values ending in 0.00005) rounded down.

Termination of Trading

Last Day of Trading is 2 London bank business day before 3 Wed of Delivery Month. Trading in expiring Bundle futures ceases at time of ED futures daily settlement – typically 2pm -- on Last Day of Trading.

Delivery Standard

One bundle of ED futures of specified Bundle Tenor (2-Year, 3-Year, or 5-Year) with Bundle Month identical to Bundle futures Delivery Month.

Delivery

CME Clearing assigns a long (short) position of one Delivery Standard bundle per expiring Bundle futures contract to holders of all long (short) positions remaining open following Termination of Trading.

nd

rd

Final Settlement Price = Average of settlement prices of Delivery Standard bundle’s constituent ED contracts on Last Day of Trading in expiring Bundle futures contract, rounded to fourth decimal place (0.0001) with tie values (i.e., unrounded values ending in 0.00005) rounded down. ED Price Assignments in Delivery

For delivery of a bundle comprising n ED contracts, CME Clearing assigns constituent ED contracts at invoice prices determined as follows: (1)

Each ED contract, excluding ED contract for nearest delivery month, is assigned at its respective daily settlement price.

(2)

ED contract for nearest delivery month (i.e., for delivery in the Bundle Month) is assigned at invoice price equal to: n x ( Final Settlement Price of expiring Bundle futures ) minus ( sum of invoice prices of n-1 most remote ED contracts determined in Step (1) )

Position Accountability and Reportability

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Bundle Futures Two-Year Three-Year Five-Year

Position Accountability (Contracts) 1,250+ 800+ 500+

| CME Bundle Futures | 29 MAY 2015

| © CME GROUP

Position Reportability (Contracts) 25+ 25+ 25+

Block Trade Thresholds

Bundle Futures Two-Year Three-Year Five-Year

RTH: 7am to 4pm (Contracts) 500+ 330+ 200+

ETH: 12am to 7am (Contracts) 250+ 165+ 100+

ATH: 4pm to 12am (Contracts) 125+ 80+ 50+

Each block trade must be reported to the Exchange by the seller within 5 minutes of transaction during RTH, and within 15 minutes of transaction during ETH or ATH. Trading Hours and Venue

Bundle Futures Two-Year Three-Year Five-Year

CME Globex and Clearing Product Code BU2 BU3 BU5

CME Globex: 5pm to 4pm, Sun-Fri. Globex Trade Match Algorithm: FIFO with LMM (T Algorithm). Futures contracts described herein trade on and according to the rules of Chicago Mercantile Exchange.

Source: CME Group

(1b) Price = 100 Minus Rate Bundle futures prices are quoted and traded in the same 100-minus-rate terms as ED futures prices. For example, a Bundle futures market price of 97.000 (or 100 minus 3 percent) signifies that market participants collectively expect the average of contract rates among ED futures in the contract-grade bundle to be 3 percent per annum at the Bundle futures contract’s expiration. As with prices of ED bundles, Bundle futures prices trade in minimum increments of 0.0025 IMM Index points (¼ of a basis point per annum in contract interest rate terms). Exhibit 2 – Minimum Price Gradation for Bundle Futures Calendar Spreads (Dollars per marginal fraction of 0.01 IMM Index points per calendar spread, unless otherwise noted) True Price Gradation (IMM Index points) 0.000625 0.00125 0.001875 0.0025 0.003125 0.00375 0.004375 0.005 0.005625 0.00625 0.006875 0.0075 0.008125 0.00875 0.009375 0.01

CME Globex Representation (IMM Index points) 0.0006 0.0012 0.0018 0.0025 0.0031 0.0037 0.0043 0.005 0.0056 0.0062 0.0068 0.0075 0.0081 0.0087 0.0093 0.01

ED

6.25

12.50

18.75

25.00

BU2 12.50 25.00 37.50 50.00 62.50 75.00 87.50 100.00 112.50 125.00 137.50 150.00 162.50 175.00 187.50 200.00

BU3 18.75 37.50 56.25 75.00 93.75 112.50 131.25 150.00 168.75 187.50 206.25 225.00 243.75 262.50 281.25 300.00

BU5 31.25 62.50 93.75 125.00 156.25 187.50 218.75 250.00 281.25 312.50 343.75 375.00 406.25 437.50 468.75 500.00

Source: CME Group

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Prices of Bundle futures calendar spreads trade in minimum price increments of 0.000625 IMM 2 Index points (1/16 of one basis point in interest rate terms). As shown in the top line of Exhibit 2, the dollar value of the minimum calendar spread price increment is $12.50 for BU2, $18.75 for BU3, and $31.25 for BU5. In each case, the magnitude resides within a small neighborhood around $25, the ED futures contract’s DV01. (See Section (1c).) Exhibit 2 also indicates for each Bundle futures product the corresponding Globex price representation and the resultant marginal dollar value of each fractional price level. (1c) Contract DV01s Like ED futures, each Bundle futures contract is sized in terms of its DV01 – the dollar value of 0.01 IMM Index points (or one basis point per annum in terms of contract interest rate). The Bundle futures DV01, in turn, is proportional to the number of ED futures in the corresponding contract-grade bundle. Example: The DV01 of an ED futures contract is $25. The DV01 of a Five-Year Bundle future is $500, equal to (20 contract-grade ED futures) x ($25 per 01 per ED futures contract). Exhibit 3 compares DV01s and dollar values of contract minimum price increments for outright purchases or sales. Exhibit 3 – Bundle Futures and Eurodollar Futures: Contract DV01s and Minimum Price Increments

Futures Contract

DV01 per Contract ( $ / 0.01 IMM Index points )

Dollar Value of Outright Min Price Increment per Contract ( $ / 0.0025 IMM Index points )

Three-Month Eurodollar (ED)

25

Nearby (0.0025 Index pts) = 6.25 All Other (0.005 Index pts) = 12.50

Two-Year Bundle (BU2) Three-Year Bundle (BU3) Five-Year Bundle (BU5) Source: CME Group

200 300 500

50 75 125

(1d) Settlement Prices On any day prior to its last day of trading, the daily settlement price of a Bundle futures contract is the arithmetic average of that day’s daily settlement prices of the ED futures in the contract-grade bundle. The same is true of the final settlement price of a Bundle future contract, with the exception that the nearby ED contract in the contract-grade bundle enters the calculation at its final settlement price instead of its daily settlement price. In all instances the arithmetic average is rounded to four decimal places (nearest 0.0001) with tie values (unrounded values ending in 0.00005) rounded down. As a consequence, daily marks-tomarket on Bundle futures positions result in variation margin amounts that are integer multiples of 0.0001 price points.

2

5

Pending certification with the US Commodity Futures Trading Commission and completion of all regulatory review periods.

| CME Bundle Futures | 29 MAY 2015

| © CME GROUP

Examples: You buy one Five-Year Bundle future at a price of 97.070, and you hold it through close of the day’s trading session. Assume the daily settlement price, based on the average of daily settlement prices of the 20 ED futures in the contract-grade bundle, is 97.0711. You collect variation margin of $55, equal to 0.0011 BU5 price points ((97.0711 minus 97.070) x ($500 per 0.01 IMM Index points per contract)). You maintain the long position through close of the next day’s trading session, for which the daily settlement price is 97.0727. You collect variation margin of $80, equal to 0.0016 BU5 price points ((97.0727 minus 97.0711) x ($500 per 0.01 IMM Index points per contract)). In neither case is the mark-to-market an integer multiple of $125, the dollar value of BU5’s outright minimum price increment. In both cases, however, it is an integer multiple of $5 (the dollar value of 0.0001 IMM Index points for a BU5 contract). Two benefits of this settlement price mechanism warrant remark – First, the daily mark-to-market on any Bundle futures contract is constrained to track the daily mark-to-market on the outright ED exposures in the corresponding contract-grade bundle. This feature is pivotal for those wanting to use Bundle futures as a compact (single line item) means of trading and holding financial exposures equivalent to (multiple line item) bundle combinations of ED futures. Second, as detailed in Section 4 below, settlement price mechanism ensures that the historically close correlative relationship between over-the-counter plain vanilla interest rate swaps and the ED futures strip extends immediately to the correlative linkage between OTC IRS and Bundle futures.

(2) The Delivery Process

rd

Typically, expiring Bundle futures cease trading at 2pm on the Monday before the 3 (IMM) Wednesday of the contract delivery month. To establish intent to participate in delivery, a market participant has only to hold a position in an expiring contract through its termination of trading. At close of business on the same day, CME Clearing assigns a long (short) position of one delivery standard bundle of ED futures per expiring Bundle futures contract to holders of all long (short) positions remaining open after termination of trade. All but one of the ED futures so assigned will be tradable. The exception is the nearby ED future. Having ceased trading earlier in the day, it will expire upon its final mark-to-market at close of business. (See Section (2c) below.) rd

Example: December Five-Year Bundle futures expire on Monday before the 3 Wednesday of the month. When the Tuesday trading session commences (typically with resumption of Globex trading at 5pm Monday afternoon) anyone who has taken delivery on a long position of one expiring Bundle future will own long positions in 19 ED contracts -one each of ED futures in the contract-grade December 5-year bundle, excluding the justexpired December ED future. The critical steps in the Bundle futures delivery process are (a) determination of final settlement prices, (b) the setting of assignment prices for ED futures positions made in delivery, and (c) the nature of immediate marks-to-market on ED futures positions delivered. The following passages review each of these, in turn, using March 2015 Bundle futures deliveries to illustrate.

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(2a) Bundle Futures Final Settlement Prices Trading in March 2015 Bundle futures terminated at 2pm on Monday, 16 March 2015. For each expiring contract, the Exchange computed the final settlement price as the average of settlement prices of ED contracts in the corresponding contract-grade bundle, shown in the second column of Exhibit 4. For the nearby March 2015 ED futures (EDH5) this was the final settlement price made around 5:45am, upon publication of ICE LIBOR for the day: 99.7298 (equal to 100 minus 0.2702 percent per annum, the day’s 3-month US Dollar LIBOR value rounded to four decimal places). For all other ED contracts (for delivery months from June 2015 through December 2019) these were the corresponding daily settlement prices set by the Exchange at 2pm. For March 2015 Three-Year Bundle futures (BU3H5) the raw final settlement value was 98.717067, equal to: ( 99.7298 + 99.615 + 99.425 + 99.220 + 99.005 + 98.780 + 98.555 + 98.350 + 98.185 + 98.035 + 97.910 + 97.795 ) / 12 The top row of Exhibit 4 shows BU3H5’s final settlement price, 98.7171, equal to the raw final settlement value rounded to four decimal places. Final settlement prices for Two-Year and FiveYear Bundle futures were set in similar fashion as 99.0850 and 98.2215, respectively. Exhibit 4 – Mar15 Bundle Futures Final Settlement Prices and Deliveries, Monday, 16 March 2015

Bundle Futures Final Settlement Price: ED Delivery Month Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

ED Settlement Price 99.7298 99.615 99.425 99.220 99.005 98.780 98.555 98.350 98.185 98.035 97.910 97.795 97.705 97.625 97.555 97.485 97.435 97.385 97.340 97.295

Two-Year (BU2H5) 99.0850

Three-Year (BU3H5) 98.7171

Bundle Futures Delivery Assignment Prices 99.7300 99.7302 99.7300 99.615 99.615 99.615 99.425 99.425 99.425 99.220 99.220 99.220 99.005 99.005 99.005 98.780 98.780 98.780 98.555 98.555 98.555 98.350 98.350 98.350 98.185 98.185 98.035 98.035 97.910 97.910 97.795 97.795 97.705 97.625 97.555 97.485 97.435 97.385 97.340 97.295

Data Source: CME Group

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| CME Bundle Futures | 29 MAY 2015

Five-Year (BU5H5) 98.2215

| © CME GROUP

(2b) Prices of ED Futures Assigned in Bundle Futures Deliveries In fulfilling delivery on an expiring Bundle future, CME Clearing assigns all but one of the delivered ED futures at their respective daily settlement prices. The exception is the nearby ED contract, for which CME Clearing sets the delivery assignment price to ensure that the average of all delivered ED contract prices matches the Bundle futures final settlement price. Examples: As shown in Exhibit 4, a CME clearing member making delivery on a short position of one expiring BU3H5 contract would have been assigned short positions of one each of ED contracts for delivery in Mar15 through Dec17. With the exception of EDH5, all would have been assigned at their respective 2pm daily settlement prices for the day. EDH5 would have been assigned at a delivery invoice price equal to: ( 12 x 98.7171 ) minus ( 99.615 + 99.425 + 99.220 + 99.005 + 98.780 + 98.555 + 98.350 + 98.185 + 98.035 + 97.910 + 97.795 ) Rounded to the four decimal places required of any ED futures settlement price, this becomes 99.7302. Following similar procedures, an EDH5 position made in delivery on either BU2H5 or BU5H5 would have been assigned at a price of 99.7300. (2c) Marks-to-Market on Delivered ED Futures Positions The delivery price assignment mechanism guarantees that immediate marks-to-market will be zero on all but one of the ED futures positions delivered. The exception, as before, is the nearby ED contract. Because its delivery invoice price absorbs any rounding error that enters into determination of the Bundle futures final settlement price, an immediate mark-to-market may apply to it. Examples: On Monday, 16 March 2015, market participants took 78 expiring BU3H5 futures contracts to delivery. As detailed in Section (2b), each resulted in assignment of one EDH5 at a price of 99.7302. Because EDH5’s final settlement price was 99.7298, any clearing member firm taking delivery on long positions in BU3H5 would have been liable for an immediate margin payment of $1.00 per contract, equal to (99.7298 minus 99.7302) x ($2,500 per ED futures price point). Conversely, any clearing member making delivery on expiring short positions in BU3H5 would have collected an immediate margin receipt of $1.00 per contract. On the same day 104 BU2H5 contracts and 28 BU5H5 futures contracts went to delivery. Each instance resulted in assignment of one EDH5 contract at a price of 99.7300. Accordingly, each clearing member firm taking delivery on a long Bundle futures position was required to post a margin payment of $0.50 per contract ( (99.7298 minus 99.7300) x ($2,500 per ED futures price point) ), and conversely for clearing member firms making deliveries on open short positions. Given the arithmetic of delivery assignment price determination, the magnitude of such immediate marks-to-market is effectively limited to no more than $1.00 per contract for TwoYear Bundle futures, no more than $1.50 per contract for Three-Year Bundle futures, and no more than $2.50 per contract for Five-Year Bundle futures.

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| CME Bundle Futures | 29 MAY 2015

| © CME GROUP

(3) Cross-Margin Offsets: Bundle Futures vs ED Futures and Others Like all futures cleared and guaranteed by CME Clearing, initial and variation margin settings for Bundle futures are determined by the SPAN Risk Manager performance bond system. In essence, SPAN calculations treat a Bundle future as if it were equivalent to its contract-grade ED bundle. An exceptional benefit for those who use both is that any account holding a Bundle future and an exact offsetting position in the corresponding contract-grade ED bundle is eligible for 100 percent margin offset. Example: Suppose you hold a long position of 175 September 2016 Two-Year Bundle futures (BU2U6) and short positions in 175 each of the eight ED futures for September 2016 through June 2018, ie, the contract-grade 2-year bundle for BU2U6. Your combined holdings qualify for 100 percent margin offset. When deployed in inter-commodity spreads (in which the legs are suitably DV01-weighted) Bundle futures also qualify for significant cross-margin benefits against other of the exchange’s interest rate futures products, including Two-Year and Five-Year Treasury Note futures, and Two-Year and Five-Year Interest Rate Swap futures for physical delivery. For example, as of mid-May 2015 a long (short) holding of 70 Five-Year Treasury Note futures is eligible for a 70% margin credit against a short (long) holding of 10 Five-Year Bundle futures. Exhibit 5 summarizes. Exhibit 5 – Margin Credits: Bundle Futures vs Treasury Note Futures and Interest Rate Swap Futures Bundle Futures BU5 BU3 BU2

Two-Year T-Note Futures (TU)

Five-Year T-Note Futures (FV) 10 FV : 1 BU5 70% 5 FV : 1 BU3 50%

7 TU : 1 BU2 60%

2-Yr Interest Rate Swap Futures (T1U)

5-Yr Interest Rate Swap Futures (F1U) 12 F1U : 1 BU5 75%

10 T1U : 1 BU2 60%

Data Source: CME Group. Cross-margin credits shown in Exhibit 4 are as of 11 May 2015, and are subject to change at the sole discretion of CME Clearing. Current margin settings and cross-margin offsets may be viewed at: http://www.cmegroup.com/clearing/margins/#e=all&a=all&p=all

(4) Hedge Effectiveness of Bundle Futures Bundle futures price dynamics closely track the dynamics of par rates on spot-starting plain-vanilla interest rate swaps. Exhibit 6 demonstrates with correlations between daily changes in mid-market spot swap rates and daily changes in Bundle futures contract rates for mid-July 2011 through midJuly 2014. All correlation values lie between 98 and 99 (on a scale of -100 to +100). Exhibit 6 -Correlations of Daily Changes: Bundle Futures Contract Rates vs OTC Par Swap Rates (18 July 2011 to 18 July 2014) Bundle Correlation with Futures OTC Par Swap Rates Five-Year 98.9 Three-Year 98.6 Two-Year 98.0 Data sources: Bloomberg, CME Group. Notes: For each Bundle future contract tenor and corresponding OTC swap tenor, 100 x Pearson correlation of (a) daily changes in historical contract rates, estimated on the basis of ED futures daily settlement prices, vs (b) daily changes in mid-market par rates for plain-vanilla spot-starting USD interest rate swaps, as of 3pm New York time. We are obliged to Wilson Wu for ably performing the calculations here and in Exhibit 7.

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Exhibit 7 – Long-Run and Moving Short-Run Correlations of Daily Changes: Bundle Futures Contract Rates vs Par Rates on OTC Interest Rate Swaps (18 July 2011 to 18 July 2014)

Data Sources: Bloomberg, CME Group

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| CME Bundle Futures | 29 MAY 2015

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Exhibit 7 suggests moreover that these relationships are robust, in the sense that correlations for short-run intervals seldom stray far, or for very long, from long-run correlation values. For FiveYear Bundle futures contract rates and 5-year par swap rates, for instance, all short-run correlation values reside between 96 and 100. (The short-run is signified in Exhibit 7 by time series of correlation values computed over a moving 63-business-day window, approximately a calendar quarter.) A fair surmise is that Bundle futures make an effective exchange-listed hedge for spotstarting swaps and swap-related asset exposures. Importantly, demonstration of their hedge effectiveness appears straightforward for the purpose of establishing compliance with guidelines prescribed by the Financial Accounting Standards Board.

(5) Block Trade Standards Standards for privately negotiated block trades in Bundle futures, shown in Exhibit 8, are set at parity with those that apply to bundles of ED futures. Example: During CME Regular Trading Hours (RTH, 7am to 4pm) any ED futures spread or combination is eligible for block trading if the total number of component ED contracts is at least 4,000. A 5-year ED bundle is eligible for block execution during RTH, for instance, if the trade size is at least 200 bundles (equal to 4,000 ED contracts / 20 ED contracts per 5-year bundle). Accordingly, the RTH minimum size threshold for block trades in Five-Year Bundle futures is 200 contracts. Any block trade in Bundle futures or in options on Bundle futures must be reported to the Exchange by the seller within 5 minutes of transaction during Regular Trading Hours, and within 15 minutes of transaction during European Trading Hours (12am to 7am) or Asian Trading Hours (4pm to 12am). Exhibit 8 -- Minimum Size Requirements for Block Trading in Bundle Futures and Companion Options RTH: Regular Trading Hours (7am-4pm) ETH: European Trading Hours (12am-7am) ATH: Asian Trading Hours (4pm-12am) CME Products

Futures

Options

Two-Year Bundle (RTH) Two-Year Bundle (ETH) Two-Year Bundle (ATH)

500 250 125

1,250 625 325

Three-Year Bundle (RTH) Three-Year Bundle (ETH) Three-Year Bundle (ATH)

330 165 80

825 400 200

Five-Year Bundle (RTH) Five-Year Bundle (ETH) Five-Year Bundle (ATH)

200 100 50

500 250 125

Source: CME Group

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(6) CME Clearing and Globex Fees (6a) Outright trades Fees for outright trades in Bundle futures, shown in Exhibit 9, are set at parity with fees for outright trades in corresponding contract-grade bundles of ED futures. Fee parity extends, moreover, to the Exchange’s current CME Globex fee discount for Non-Member trading of Bundles. Example: For ED futures, the Exchange’s posted all-in fee for outright trading by Customers of Member Firms (Non-Members) is $1.19 per contract, comprising Clearing fees of $0.64 plus the standard CME Globex fee of $0.55. The Exchange currently allows a reduced CME Globex fee for Non-Members of $0.10 per contract for any ED future traded outright via a bundle combination; added to the $0.64 Clearing fee, this makes a de facto all-in fee of $0.74 per ED contract traded via a bundle. Fees for Bundle futures are set at parity with the reduced all-in rate. As displayed in the bottom row of Exhibit 9, for instance, $5.92 (equal to 8 ED futures x $0.74 per contract) is the all-in fee that a NonMember would pay either to trade outright a 2-year bundle of ED futures or to trade outright a single Two-Year Bundle futures contract. Exhibit 9 – Eurodollar Futures and Bundle Futures Fees ($ per side (both buy side and sell side) per contract) All-In Fee for Bundle Futures CME Membership Type Individual Equity Members / Clearing Members / Rule 106.I Members / Rule 106.J Equity Member Firms / Rule 106.S Member Approved Funds Rule 106.D Lessees / Rule 106.F Employees Rule 106.R Electronic Corporate Member – Holding Member Rule 106.R Electronic Corporate Member – Volume Incentive Program Rule 106.H Firms / Rule 106.N Firms Asian Incentive Program (AIP) Participants International Incentive Program (IIP) Participants and International Volume Incentive (IVIP) Program Participants Latin American Bank Incentive Program (LABIP) Participants Latin American Commercial Incentive Program (LACIP) Participants Latin American Fund Manager Incentive Program (FMIP) Participants CTA/Hedge Fund Incentive Program Participants CBOE Members (reduced for S&P Index and E-mini/E-micro S&P only) Customers of Member Firms (Non-Members)

CME ED Clearing Fee

CME ED Globex Fee

Two-Year

Three-Year

Five-Year

0.09

0.10

1.52

2.28

3.80

0.27 / 0.30 0.34

0.10 0.10

2.96 / 2.40 3.52

4.44 / 3.60 5.28

7.40 / 6.00 8.80

0.49

0.10

4.72

7.08

11.80

0.34 / 0.49 0.34

0.10 0.10

3.52 / 3.92 3.52

5.28 / 5.88 5.28

8.80 / 9.80 8.80

0.34

0.10

3.52

5.28

8.80

0.34

0.10

3.52

5.28

8.80

0.64

0.10

5.92

8.88

14.80

0.34

0.41

6.00

9.00

15.00

0.64

0.10

5.92

8.88

14.80

0.64

0.10

5.92

8.88

14.80

0.64

0.10

5.92

8.88

14.80

Source: CME Group

(6b) Calendar spreads The holder of a long (short) position in the nearby ED bundle may transform it into a deferred bundle by selling (buying) the nearby ED contract and buying (selling) the ED contract for delivery in the most distant March Quarterly month in the deferred bundle. Irrespective of the tenor of the bundle combination – whether 2-year, 3-year, or 5-year -- the fee cost of this “roll” transformation is the sum of outright fees for trading two ED futures.

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In view of this consideration, the all-in fee for a calendar spread trade in any Bundle futures 3 contract is set at twice (2x) the corresponding fee for an outright trade in ED futures. This fee setting applies only to Bundle futures traded via bona fide intra-commodity calendar spreads. It does not apply to sequential outright trades, irrespective of whether they are made with the intent of legging into such calendar spread exposures. Exhibit 10 exemplifies with CME Globex trading fees for 106.J Equity Member Firms and for Customers of Member Firms (Non-Members). Exhibit 10 -All-In Fees for CME Globex Trading in Bundle Futures Calendar Spreads ($ per side (both buy side and sell side) per contract or per contract combination)

Outrights 106.J Equity Member Firms Customers of Member Firms (Non-Members)

ED Futures

Two-Year Bundle Futures (~8 ED)

Three-Year Bundle Futures (~12 ED)

0.19

1.52 ( = 8 x 0.19 )

2.28 ( = 12 x 0.19 )

3.80 ( = 20 x 0.19 )

0.74

5.92 ( = 8 x 0.74 )

8.88 ( = 12 x 0.74 )

14.80 ( = 20 x 0.74 )

0.38 ( = 2 x 0.19 )

0.38

0.38

1.48 ( = 2 x 0.74 )

1.48

1.48

Calendar Spreads 106.J Equity Member Firms Customers of Member Firms (Non-Members)

Five-Year Bundle Futures (~20 ED)

Source: CME Group

(6c) Bundle Contracts and the ED Clearing Fee Volume Tier Discount Program ED contracts currently are subject to a Clearing Fee Volume Tier Discount Program. Under the terms of this program any market participant whose trading activity in ED futures or options meets a certain average daily volume threshold is entitled to a lower Clearing fee rate, discounted from the base rate of $0.09 per contract, on trading volume above and beyond the threshold. Trading activity in a Bundle futures contract (or its companion options) enters into the reckoning of program participant trading volumes, at parity with the number of ED futures in the corresponding contract-grade ED bundle. Example: If a program participant trades 10 Two-Year Bundle futures per day in a given month, ED-equivalent trading volume of 80 contracts per day (equal to 10 Two-Year Bundle futures per day x 8 ED per contract-grade bundle) would be added to her ED trading volume in determining whether it surpasses the program’s prescribed volume tier threshold for the Clearing fee discount. Moreover, the discounted Clearing fee per contract for any Bundle futures trading volume beyond the program tier threshold is set at parity with the discounted Clearing fee per ED contract. Example: Exhibit 11 demonstrates how trading activity in Two-Year Bundle futures would be incorporated into the Clearing Fee Volume Tier Discount Program for a hypothetical Individual Equity Member who pays the baseline clearing fee of $0.09 per contract for trading volume up to and including 30,000 ED per day, and who is entitled to a discount of $0.02 per contract (i.e., a reduced clearing fee of $0.07 per contract) on the incremental 30,000 ED traded per day (i.e., contracts 30,001 through 60,000).

3

The parity principle that informs the proportionality between fees on Bundle futures calendar spreads and fees on ED futures calendar spreads is similar in spirit to the parity principle that establishes comparability between the ED futures contract DV01 and the dollar value of the minimum price increment for a Bundle futures calendar spread and. See Section (1b).

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Exhibit 11 – Two-Year Bundle Futures and the ED Clearing Fee Volume Tier Discount Program Assume Member trades 28,000 ED and 250 BU2 futures per day (equal to 2,000 ED equivalents) up to the volume tier threshold @ $0.09 per ED (or ED equivalent), then trades an additional 2,000 ED and 50 BU2 futures per day (equal to 400 ED equivalents) beyond the volume tier threshold @ $0.07 per ED (or ED equivalent). Trading Volume (Contracts)

Applicable Clearing Fee ($ per contract)

Daily Volume at or below Threshold ED BU2 (~8 ED)

28,000 250

0.09 0.72 ( = 8 x 0.09 )

Daily Volume above Threshold ED BU2 (~8 ED)

2,000 50

0.07 0.56 ( = 8 x 0.07 )

Source: CME Group

Disclaimer The Exchange has entered into an agreement with ICE Benchmark Administration Limited which permits the Exchange to use ICE LIBOR as the basis for settling Three–Month Eurodollar futures contracts and to refer to ICE LIBOR in connection with creating, marketing, trading, clearing, settling and promoting Three–Month Eurodollar futures contracts. Three–Month Eurodollar futures contracts and Bundle futures contracts are not in any way sponsored, endorsed, sold or promoted by ICE Benchmark Administration Limited, and ICE Benchmark Administration Limited, has no obligation or liability in connection with the trading of any such contracts. ICE LIBOR is compiled and calculated solely by ICE Benchmark Administration Limited. However, ICE Benchmark Administration Limited shall not be liable (whether in negligence or otherwise) to any person for any error in ICE LIBOR, and ICE Benchmark Administration Limited, shall not be under any obligation to advise any person of any error therein. ICE BENCHMARK ADMINISTRATION LIMITED MAKES NO WARRANTY, EXPRESS OR IMPLIED, EITHER AS TO THE RESULTS TO BE OBTAINED FROM THE USE OF ICE LIBOR AND/OR THE FIGURE AT WHICH ICE LIBOR STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. ICE BENCHMARK ADMINISTRATION LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH RESPECT TO THREE–MONTH EURODOLLAR FUTURES CONTRACTS OR BUNDLE FUTURES CONTRACTS. The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are ECPs within the meaning of section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade. All references to options refer to options on futures. CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex, SPAN Risk Manager, and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners. All matters pertaining to rules and specifications herein are made subject to and are superseded by official Exchange rules. Current rules should be consulted in all cases concerning contract specifications. Copyright © 2015 CME Group. All rights reserved.

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